Israeli Prime Minister Ehud Olmert says prospects for peace could be boosted by the creation of a new Palestinian government without the Hamas party.
Fatah gunman seized the parliament building in Ramallah
Israel would regard such a cabinet as a partner, he said, adding that Hamas' exclusion "creates opportunities".
Palestinian Authority President Mahmoud Abbas is to swear in a new cabinet after his Fatah party's violent split with the Islamist Hamas movement.
The US says it will lift an aid embargo once the new cabinet takes over.
The US consul-general in Jerusalem, Jacob Walles, said there were no obstacles to re-engaging with the new government, which would have full US support.
On Saturday night, Mr Abbas issued an emergency decree allowing him to swear in a new cabinet without the approval of parliament, in which Hamas has a majority.
Finance Minister Salam Fayyad is set to become the new prime minister. The presidential decree also enables his government to bypass parliament when they make decisions.
Mr Abbas sacked the Hamas Prime Minister, Ismail Haniya, on Thursday after factional fighting left more than 100 people dead in Gaza.
Shortly afterwards, the Hamas movement said it had taken over full control of Gaza, as its gunmen ransacked Fatah offices and arrested or executed its fighters.
The two parties briefly shared power in a fragile coalition formed after Hamas won a landslide victory in elections last January.
But the foreign aid that is a lifeline for Palestinian people and institutions was curtailed over Hamas's refusal to renounce violence and recognise Israel.
Mr Olmert said on Saturday that the planned formation of a new government could boost chances for peace and could be "advantageous" for the Palestinians.
Born in 1952 near West Bank city of Tulkarm
Holds a PhD in economics from the University of Texas
Worked at the World Bank in Washington from 1987-1995
IMF representative to Palestine until 2001
Finance minister under the Fatah-controlled administration from 2002-2005
Credited with cracking down on official corruption
Recent changes had made the situation "clearer", he said.
The new cabinet, he said, "presents an opportunity that has not existed for a long time".
"A Palestinian government which is not a Hamas government is a partner and we will co-operate with it."
Mr Olmert was speaking before boarding a flight to the US for talks.
Mr Abbas is expected to swear in the emergency government on Sunday at 1300 local time (1000 GMT).
Hamas has denounced the move to form an emergency administration as illegal.
On Saturday, violence between the rival factions spread from Gaza to the West Bank, where Fatah remains dominant.
Second deputy speaker Hassan Khuraishah, an independent, told the BBC he had been beaten up as he tried to prevent Fatah gunmen from raising their flag.
In a show of strength, Fatah supporters paraded around Ramallah, firing weapons into the air and chanting "Hamas out".
Almost all Hamas politicians and prominent supporters in Ramallah have either fled or gone into hiding.
Fatah supporters also took over the Hamas-controlled legislative council in Nablus.
Meanwhile, hundreds of Fatah supporters are reported to have been fleeing Hamas-controlled Gaza by land and sea.
Gaza, and the much larger West Bank, are just 45km (30 miles) apart, but correspondents say they now look poised to function as two separate territories.